Thunderbird Endures Shrinking Pains
By Francesca Di Meglio
Rumors can get started easily, especially on B-school campuses, where people tend to live and work in close quarters. Just ask those at Thunderbird, The Garvin School of International Management in Glendale, Ariz., which has been the center of attention for the last couple of weeks, since reports surfaced in the Arizona Republic that the historic global program was possibly for sale because of financial difficulties.
It's no secret that the nearly 60-year-old school, which has an international focus throughout its curriculum and requires students to be at least bilingual, is struggling. Upper management recently eliminated 17 administrative positions and has been downsizing the full-time MBA program -- going from a class size of 1,305 students five years ago to one of 606 today. Also, Thunderbird raised its tuition to $32,100, from $29,300 in 2004, which is unusual for a school that rarely raised fees on par with its competitors.
But the relatively new administration -- President Angel Cabrera only arrived in August, 2004 -- says the school isn't for sale, nor is it posting a "going out of business" sign. The data, Cabrera says, are simply indicative of growing pains, an inevitable part of a new strategy to diversify revenue streams to keep the school alive in a soft market. "We're trying to manage our business the way businesses should be managed," says Cabrera. "We must apply our knowledge to ourselves, too."
That doesn't mean it's business as usual at Thunderbird. The administration is planning to make sweeping, dramatic changes to stay competitive among top B-schools, many of which are now offering the kind of international programs that once were only available at Thunderbird.
What is true is that Thunderbird may move or restructure its campus. Cabrera says that some of the buildings are old, and parts of the property go unused. As the strategic vision for the school shifts, so must the structure of the campus, he adds. Cabrera and his colleagues have just begun to investigate their options.
A desire to find cozier quarters might have something to do with the full-time program's shrinking size. Applications have been down for most full-time MBA programs for some time. A private nonprofit school that offers only graduate business education, Thunderbird was particularly vulnerable when the dot-com bubble burst and fewer people were going to B-school.
"When the graduate business program is starting to have trouble, we can't rely on the medical or law school like traditional universities," says Chief Operating Officer and Chief Financial Officer Tim Propp. Things only got worse when the 9/11 terrorist attacks further weakened the economy and ensuing changes in visa requirements made it more difficult to admit international students, who at one time made up about 50% of the Thunderbird population. (They now account for about 43%.)
Switching gears became a must for all B-schools, especially Thunderbird. Now, the plan is to rely less on the full-time MBA program and develop executive programs to leverage the market trend toward part-time educational opportunities. Recently, Thunderbird's open-enrollment and custom executive education programs placed among the Top 20 in the 2005 BusinessWeek rankings. Propp says revenues from non-full-time programs exceeded those of the full-time MBA for the first time in June, 2005.
Administrators are also hoping to develop partnerships with other B-schools around the world and offer distance-education programs to bring their services to those who can't get to Arizona. Already, the school announced a partnership with Indiana University's Kelley School of Business to offer a Master's of International Management/MBA dual degree in a program that blends online and campus-based learning.
The shift in priorities has many wondering what the future will hold. A new focus on executive and distance programs has some concerned that the full-time program, which has been the hallmark of Thunderbird, could become a thing of the past. The administration is assuring the community that the full-time MBA might be smaller than it was before, but that it will remain the cornerstone of Thunderbird's offerings.
Students brought their questions to Cabrera in a recent town-hall meeting. Matthew Harker, a second-year student set to graduate in May, 2006, and the Thunderbird Student Government president, says many of his classmates are worried. But, he adds, they also understand the changing marketplace and are pleased that the administration is communicating its strategy.
Despite the uncertainty that came with these major changes, most students remain pleased with their education, says Genevieve Gutierrez, a second-year student set to graduate in December, 2005, and editor-in-chief of the campus newspaper Das Tor. "Whenever there's change, there are growing pains," she adds.
Thunderbird staff say the community must be patient. Revenues are up from $48.8 million in 2001-02 to $55.4 million in 2004-05. However, the school continues to have costs that don't allow for an immediate return on investment, says school spokesperson Frank Neville. Administrators, including Cabrera, argue that you have to invest money to make money. Despite this, the school is set to balance its budget in 2006, says Propp.
Things aren't all bad. Amid the rumors and speculation, recruiters, for the most part, have remained loyal to the school. For the last two academic years, 40% of job-seeking graduates had at least one job offer by graduation. The school's international bent is a major selling point.
"At Citigroup, we're continually looking for bright, articulate leaders with a global perspective that makes them comfortable operating in a diverse, multigeographical organization such as ours," says Keith Waitt, managing director of Risk and Compliance Training & Development at Citigroup (C ). "There's a terrific match between Thunderbird's international orientation and Citigroup's global footprint, and this is what makes Citigroup one of Thunderbird's top hiring organizations." (See BW Online, 1/30/05, "Making the Connection at Citi.")
Cabrera is not at all surprised to hear that Thunderbird students are uniquely fit for today's global marketplace. "The world needs Thunderbird more than ever before," he adds. Time will tell if the world truly agrees.
Di Meglio is a reporter for BusinessWeek Online in Fort Lee, N.J.